concerned about WBAI since Feb 2004
core recovery contingency plan for layoffs if necessary
again looked at WBAI finances as of 10/04 agreed to look at WBAI after fall drive
drive got $926,000 goal was $900,000
visited WBAI w/ED during drive
looked at upcoming drives
goals upcoming drives are $1.1 million for winter and spring
cash flow-- 9/30 is usually low cash point. Generally CPB funds come in at that time as a lump sum got $840K this time. Again in Spring get a lump sum for total of $1.6 million.

WBAI got $181K from CPB in october to help bridge gap
today (12/28) WBAI has $328K in bank
next drive starts on 1/17

3 concerns:

1. cash -- if drive does not realize the money (over 3rd month after drive 10-15% of money comes in) will need to have in place several scenarios for reducing expenses.
2. transition -- Rojas is leaving 3/31. has not changed his mind. transition team: CFO, ED, don rojas, business manager, some lsb people, some union people, PD
3. new LSB -- integration of that board into operation, maybe new interim GM, room for "hits and misses."

Goal for WBAI has to be to move away from hand to mouth existence. A number of ideas are being tossed around as to how to achieve that. What will it take for station to have a sustainable financial base for the future?

Blanchet: To what extent can we rely on a line of credit? Is that an option?

Hicks: we can. but he is nervous about it. line of credit would have to be $250K or so. hard to manage or control. Would not be his first choice.

Blanchet: cash flow problem is being handled locally, not nationally. (re line of credit)

Hicks: need centralized handling line of credit.

Adelson: borrowing money to cover a structural problem is a danger. need to look at how much can be raised and cost struture. to delay that by incurring debt seems dangerous. What is the fulfillment projection?

Hicks: at WBAI it's 75%. total $675K comes in over 2-3 months. They are about where they should be. About $30-40-50K short, but there is a holiday.

Spooner: October income statement says $40k for CPB plus $150K in "cash & capital" CPB. Q1: why is it not shown all together. Q2: because we get all CPB money in two lump sums, it seems prudent not to plan to spend it all at once. I.e., that there is a reserve to carry over the dry months in summer. Are we using 6 mos of CPB money in 2 mos.? Do you feel that we have enough control over expenses at WBAI to come out of this fiscal year to get through october to next drive, or will we use up CPB money to get through October.

Hicks: A1: accounting software is responsible, it forces you to accrue it (???) budget is a control mechanism. Also accountants want us to do it that way. A2: wants each station to have one month's reserve.

Spooner: heard hicks say that CPB money to bridge gap. Is that so?

Hicks: they will use it to pay payroll or whatever. they didn't spend it. They used it pay bills (???) If they spend CPB money beyond $40K budgeted monthly amount we will know.

SPooner: Income statement says they did spend it, if I understand correctly. Excess income over expenses of $137K, not including the $150K WBAI got from CPB.

Hicks: they used those funds to bridge the gap.

SPooner: so they used more than the $40K to bridge the gap.

Hicks: yeah, that would be true for most stations.

Spooner: I don't think it was true for any other station, as I understand.

Hicks: true for Nat office, WBAI, in diffent yrs true for other stations, true for archives. and some ???? Ask did they recoup enough in the drive to make up for the $150K that they spent. So they have over $300K at end of December.

Spooner: seems they are on budget for the drive, but over budget for the CPB money.

Williams: asks for clarity on numbers. (hard to understand this question.) Basically repeats Carol's point that WBAI is living on income from drive immediately previous.

HIcks: basically WBAI "borrows" CPB money to be repaid by later money's from fund drives.

Williams: how is this shown in income sheets?

Hicks: ???

williams: CPB money was taken to income. So on balance sheets for December, do you show anything for CPB money, since it was all used up?

HIcks: yes, at end of December, it says $328K, everyone says that's great, but I'm not relaxed about that.

Williams: No, because you really don't have the $300K of reserves.

HIcks: using incoming funds against projected revenues. If they were to overproduce in the dirve by $100K they would be level again. This happened last year too. in effect you have to increase revenue to make for money you borrowed against that revenue. $100K would be an important item to track in next drive. So we are looking at 1.2 (million goal?). Or they could cut expenses. That's why I'm nervous. Not only do you have a higher number, but you have deficit that is looming.

Williams: need to see it laid out for better understanding.

Hicks: has indra's [WBAI business manager] current cash flow statement

Williams: don't have it.

Hicks: Baruti has it. WBAI will have $60K as of beginning of Jan drive.

Adelson: WBAI budget sys total listener support thru Nov. 632k, thru Dec 768K, total income 850k thru NOv, 1.04 mill by end of december. Where do we stand as of first two months?

Hicks: listener support on MEMSYS is about $560K thru Nov.

Adelson: so it is $70K short. Does this mean we have a looming problem?

Hicks: they will have to make this up in next drive by excess revenue or reducing expenses.

Adelson: if they have to cut, how to do it? reducing staff may induce severance obligations. Will money stored around the network get drawn on to meet costs assoc with such cost reduction? what is discussion at WBAI as to what will happen in event that expenses need to be reduced? When does this get triggered?

Adelson: Budget calls for $768k by end of December. so if we've collected $630K by end of december we are even farther behind than $70K.

Spooner: memsys shows about $658K by 12/21

adelson: assume $10K came in over last 10 days, so WBAI is about $100K behind now.

Hicks: still says WBAI is $60-70K behind. need to see why. perhaps numbers have not been entered.

Bediako: need to look at expense side also. Perhaps expenses are lower.

Hicks: Yes. But what do you do if you have a problem.

adelson: and what is the check off-- what is the role of the local people, the national, etc.

Hicks: I go back in Jan meet w Don [ROjas], indra [Hardat], baruti, etc. if we do have an issue. need to reduce expenses. revise revenue projections. Plan calls for non-layoff expenditure expenses first. then move to layoff expenses. labor union may put forth priorities. planing process has been gone thru. plan is in place. could be partial layoffs.

Lonnie will trigger plan.

Bediako: When would Lonnie have numbers to make above decisions.

Hicks: looks at credit card receipts. they come in 5-10 days after start of drive. if they do not meet goals, that's a red flag. that's time to start moving.

Adelson: if we are this much behind now. Q1 -- when can we see monthly reports that include November. Is they anything that can done to see whoops we fell further behind. If costs need to get cut, they need to get cut. Q2 -- what level of cooperation are you getting? is there consensus around the contingency plan or will it create problems?

Hicks: met w/ union people two weeks ago to warn them. They know the routine. would it be wise to start cutting expenses now? yes it would, but it needs to be under the radar. it would destroy morale.

Adelson: is the plan specific as to persons and hours.
Hicks: yes, they are aware.
Adelson: so the consequenses are known, but they are being given as much of a chance as possible to address problem before triggering it.
hicks: yeah...
Adelson: asks Bediako what he knows.

Bediako: had a preliminary conversation w/ don. general feeling was that we are OK at this point. is surprised that we are $70K short.

Hicks: too early to tell if non-listener support money is keeping pace with budget. "and there is a development person they are trying to get on board too...."

Spooner: why the discrepancy? fund drive exceeds goal, but according to memsys report listener support number is $70K-$100K low as of end of december. fulfillment rate is pretty good. thinks there are some red flags right now.

(discussion of fulfillment rate, but no answer to underlying question.)

Hicks: need LSB members to call to raise fulfillment rate.

Williams: has there been any fruit from Phil Osegueda's (KPFA fund drive guru) visit to NY last month.

Williams: all are working hard on this question. operations outside fund drives better advertising than fundraising.

spooner: kpfa did first annual peace awards dinner. major donors gave 100k. knows wbai is pursuing similar avenues. But market research indicates that we can't get away from on-air drives. they are and will be bread and butter.

spooner: it's money wbai received has received but has not completed the work the the grant is to be for?

hicks: yes.

spooner: recievables of 62k in 10/31 balance sheet -- what does that represent?

hicks: customarily is any moneys that are owed to WBAI or deposits or prepay

spooner: so that is not real money they could cash in?

hicks: probably not

v
Bediako: do we carry over uncollected pledges from prior drives?

hicks: that could be part of receivables.

spooner: how do you calculate the % of the pledges you expect to receive?

hicks: some people are paying monthly deductions from their credit cards that's a receiveble. That's held over from previous fiscal.

williams: are EFT fulfilled pledges a receivable?

hicks: auditors will look at historical fulfillment rate at WBAI ???

adelson: sounds like williams assumption is correct.

williams: and you age it right?

hicks: yes

williams: and you have that from the auditors?

hicks: yes

adelson: re severance obligations and staff cuts -- will that create addition expenses that need to be met by reservges around the network.

hicks: has costed out layoffs. layoffs of 1/2 staff could cost up to 100k. could pay out over 5 months. could be affordable if done in phased way.

adelson: 1/2 staff layoff is extreme for us. we are talking about layoffs of a smaller number. what is overhead cost. btw, we should see contingency plan. who bears that cost?

hicks: cash flow statement has reserves. that reserve would be used. if wbai did it in in a phased out way, wbai could afford severances.

spoooner: could you send indra's recent cash flow projections to the committee?

hicks: ??? could baruti forward it? yes.

adelson: does contingency plan exist in a single file that you could send?

hicks: would like to meet special on it -- it has people's names

adelson: could black out names

hicks: ??? upcoming review of new fund drive not a long time off.

adelson: wants financials thru november and look at variances and contingency plan so we can get a grip. is that doable?

hicks: december financials not ready by 1/20

adelson: i know. I only want up thru november.

hicks: that's possible, yea.

adelson: review -- they have red flags contingency plan in place doesn't look like they have to pull money out of other places in network. do we need to make a statement to pnb?

spooner: at 10/2 PNB agreement was to pass wbai budget on contingency and to review by now. based on oral reports, they are close to but not meeting listener support, and they are using cpb money they are not budgeted to use. perhaps that could be the note.

adelson: need a note to PNB. could hicks do it? if there will be adjustments, PNB will have to approve it.

adelson: yes, but we were specifically asked to report on this. a short 5-line report would be in order.

williams: agrees that we need to make a report along those lines.

adelson: lonnie, will you be willing to write a brief report?

hicks: sure. what's in it.

adelson: on a cursory look, this is what we understand: 1) compared to budgeted listener support, wbai currently 70K-100k behind. 2) lonnie and dan have met w/ wbai people and have a contingency plan to cut costs if income does not meet projections. 3) not expected that implementation of that plan will impact other units. 4) CPB funds received in october have been used to meet the shortfall. 5) implementation of contingency plan will be looked at after ....(hicks will finish).

williams: is cpb funds earmarked to specific tasks? do you have to write a report at the end of the year?

hicks: cpb monies are for national programming. my office doesn't generate reports. is general support grant.

spooner: 25% for national programming and 75% for general programming?

hicks: cpb wants funds for national programming in local budgets.

spooner: But 75% has no restrictions? for general programming?

hicks: 75% is for national programming.

Spooner and others: I think it's the other way. 75% has no restrictions. call unrestricted grants.

v
spooner: should insert in report how much cpb money was received for general use, how much they were budgeted to spend. Can you do that? they were budgeted to spend $120K oct-dec, they spent $180K. we need to understand how cash flow problem was finessed.

hicks: would not say it that way. they used cpb to bridge gap. was cash flow problem structural? we assume it is. last year monthly expenses were 310K/mo. now driven down to 260-280K/mo.

spooner: that is reduced budget from october

hicks: reduced expenses are being followed so far. unsure whether it can be continued.

adelson: need to look at WBAI rent. need to think of costs of moving. needs to be priority for this committee. $1/2 million/yr rent is crazy.

hicks: need to get them out of the building. cost 200k to move

adelson: that could be a network commitment.

hicks: that would put station on more solid footing (lower rent).

adelson: should put rent in our report.

spooner: also at WPFW is a problem.

warren: but this meeting is only for WBAI.

spooner: network commitment to WBAI's move needs to be put up for discussion. could be sticky, since we can't take reserves from one station and give to another station.

adelson: but could loan money

spooner: yes, that happened in the mid 90s -- money was lent to WPFW and WBAI (to move into wall st). audits of last ten years show when those loans were made and that they have not yet been paid back (!)

williams: transition team for new GM -- could throw WBAI lease/location into transition issues.

adelson: where in the network is the person who can spend time on getting WBAI into a better location? is there any action in that direction?

hicks: when there was development director, don was working with the DD and some board members to identify sites. DD did not work out. looked like 100K -200K would be needed. Now Don is leaving, there is no DD. So I think we need to look at it as a national issue.

adelson: hard to make structural change when one spends all energy on structural change.

turner: could include WPFW location as well.

hicks: need asset committee on these issues.

all: no objection to including location change as part of report on WBAI.

williams: thinks local team/transition team needst to take lead on this.

hicks: can get this report done by 1/15. PNB starts on 1/13

adleson: would like to meet 1/11 briefly to assemble report. No objection to this motion. lonnie will draft bullet point note. We will go over it on the list. I will transmit to PNB once we have agreement.